New York’s teetering economy will require a series of painful spending cuts to programs used by nearly all state residents and force more than $4 billion in higher taxes on everything from health insurance policies to soda and other sugary drinks, Gov. David A. Paterson said Tuesday in proposing to close a $15.4 billion budget deficit.
Money to lure new jobs would be cut, as would efforts to protect the environment. Nearly 2,000 prison inmates would be released early to save money. State workers would be laid off, and those who aren’t would see their salaries and benefits frozen and cut.
The state’s debt would be driven to historic levels, and state university tuition would jump by 14 percent. Nearly $1.5 billion in annual property tax rebate checks would be scrubbed. Education and health care, the two biggest areas of the budget, would see $4.5 billion in cuts.
“We’re going to have to take some extreme measures,” Paterson told lawmakers of the challenge of closing the state’s largest deficit ever.
The reaction was swift — and negative.
Hospitals and nursing homes would close, health care officials say, and those that don’t would cut back on patient care. As a result of Albany’s decreasing school aid, schools would reduce classroom and after-school programs, and property taxes would rise, education officials warned.
Middle-class taxpayers would be hit hard, critics said, not just from the cuts, but from the stunning array of increases in taxes and fees.
New Yorkers would pay more for registering a car, catching a salmon or trout, going to the movies, getting a haircut, buying gasoline, drinking beer and buying nondiet soft drinks.
Republicans say the Democratic governor’s tax and fee plan is actually $2 billion higher than being revealed. In all, there are 151 proposals that would create or increase taxes.
Beyond the cuts and tax increases, the proposed budget has a good share of what critics call gimmicks.
Paterson, for instance, is proposing to “sweep” $1.4 billion from off-budget accounts, such as from the New York Power Authority, into the general fund to balance the ledgers. Indeed, nearly 40 percent of the plan to reduce the deficit in what’s left of this fiscal year would come from such transfers. A additional $1.1 billion in actions next year would come through nonrecurring moves, or “one-shots.”
The Paterson administration, under fire from long-standing political allies, including labor unions and social services groups, sought to portray a budget plan with few options.
Laura Anglin, the governor’s budget director, said the increases in taxes and fees are necessary because, without them, the state’s general fund would have faced an 11 percent cut — forcing deep retrenchment in vital government services.
As it is, Paterson said the budget is “teetering on the verge of threatening public health” when it comes to some of the proposed health care cutbacks.
School funding would be cut by $700 million, and extra help for poorer districts to comply with a landmark court case would be spread out over eight years instead of four. The average district would lose 3 percent, though many suburban schools are facing double-digit funding cuts.
The legislative response was predictable: Democratic leaders stood by their governor but left open the door for changes.
Assembly Speaker Sheldon Silver, D-Manhattan, said the Assembly will make sure that cuts and tax increases “do not fall disproportionately on the backs of working-class” New Yorkers, while the Senate’s top Democrat, Malcolm A. Smith of Queens, said, “Everything should be on the table.”
The governor rejected calls to raise income taxes on wealthy residents, though his proposal does eliminate itemized deductions for millionaires. He did open the door to hitting the wealthy more in any final budget deal.
Senate Republicans, who are about to fall into the minority in the 62- member chamber come January, said that the governor’s plan will make health care costs for residents more expensive and that changes to the STAR property tax rebate program would boost levies for homeowners. “We have a spending problem in New York State. We don’t have an undertaxation problem,” said Senate Majority Leader Dean G. Skelos, R-Rockville Centre.
The proposal calls for consolidating some state agencies. Paterson also wants to close four prison camps, though none in Western New York. His early release program would put at least 1,600 inmates on the streets, and 700 prison jobs would be cut overall.
In all, the state work force would be reduced by 3,100 people, including 521 layoffs. State workers would be asked to defer five days of pay and give up scheduled 3 percent salary increases in 2009. State retirees and workers would have to pay a greater share of their health insurance costs. Some of the benefits also would affect local government workers and retirees.
The proposal would keep the state’s general fund spending at $55.4 billion. The entire budget, which includes federally funded programs, would grow by $1.3 billion, to $121.1 billion, a 1.1 percent increase, which would be the lowest rate of growth since 1996.
The level of increase in taxes and fees surprised many officials. “The only thing not being taxed is sex and drugs,” one Senate staff member said.
There is a new 18 percent sales tax on nondiet sodas, and Paterson wants to eliminate the sales tax exemption on clothing and footwear purchases of less than $110. Cable television and satellite radio services would be taxed higher, as would massages and computer software purchases, and using state parks would be more costly.
Paterson also is turning to gambling to balance the budget. He wants to let people bet for more hours in a day on Quick Draw and at racetrack casinos. In addition, wine could be sold in grocery stores.
Aid to the City of Buffalo would be cut by $1.3 million, but Paterson is proposing to let the city keep all future revenue-sharing — with none going to Erie County — from the Senecas’ Buffalo casino.
The plan has two goals: eliminate a $1.7 billion deficit in the current fiscal year and erase a $13.7 billion deficit for the 2009 fiscal year starting April 1.
Much of the $1.7 billion would be achieved in ways Paterson already proposed in November, and which lawmakers rejected in a failed special session, such as $500 million in health care cuts to hospitals and nursing homes, expansion of the bottle bill to noncarbonated beverages and an increase of $620, or 14 percent, in state university tuition.
To make up for some of the education cuts, Paterson is proposing exempting schools from the state’s expensive, union-backed Wicks Law — which drives up public facility construction costs. But many schools already have ended ambitious new construction programs.
Daniel Sisto, president of the Healthcare Association of New York State, said the net impact of cuts to hospitals, nursing homes and home care would total $2.6 billion. He said Western New York facilities, in particular, would feel the brunt.
Noting the number of hospitals and nursing homes that have closed in the last five years in the state, he said the cuts would “certainly accelerate the demise of some institutions” and leave the rest with cuts in staff and services.
The state’s Medicaid program would grow by 3.8 percent, instead of the 12 percent scheduled for 2009. The health insurance industry would be slapped with $855 million in higher assessments — money the industry says will be passed along to consumers in the form of higher premiums.
Community colleges would get aid cuts, and the Tuition Assistance Program, the nation’s largest college grant effort, would become more restrictive for graduate students and part-time students and those with bad grades — cutting $47 million in funding for TAP.
A new low-cost loan program for students in New York colleges was proposed, while SUNY tuition would rise by $620 a year.
Paterson said he wants lawmakers to adopt 2008 deficit-reduction plans in January and a 2009 budget by March 1 — one month early, which he said would save $1.3 billion by spreading costs and revenues over 13 months.
Getting a budget done in February, Silver said, would be “very difficult.”
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Originally Posted by Acoustic-Fury
